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Differential investment in an AI-based technology and economic growth: a tale of two regions

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  • Amitrajeet A. Batabyal

    (Rochester Institute of Technology, USA)

  • Hamid Beladi

    (University of Texas at San Antonio, USA)

Abstract

In this paper, we analyze a dynamic model in which two stylized regions, A and B, use an artificial intelligence (AI)-based technology α(t) to produce a knowledge good Qt. Even though the initial value of the AI-based technology α(0) is identical in both regions, region A saves and hence invests more than region B to make the existing AI-based technology more powerful. We show that this differential investment means that the ratio of the output of the knowledge good in region A to region B or QA/QB is continually rising. In other words, without targeted policy, region A will become a "leading region" that experiences economic growth and innovation ahead of region B which will become a "lagging region" that innovates less and hence tends to grow more slowly.

Suggested Citation

  • Amitrajeet A. Batabyal & Hamid Beladi, 2025. "Differential investment in an AI-based technology and economic growth: a tale of two regions," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 16, pages 5-12, June.
    • Handle: RePEc:jes:journl:y:2025:v:16(1):p:5-12
    DOI: https://doi.org/10.47743/ejes-2025-0101
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